NO FRAUD.

Auckland Star, Volume LVI, Issue 259, 2 November 1925, Page 9

NO FRAUD.

BANKRUPTCY AND JIORTGAGE. (By Telegraph.—Press Association.) WELLINGTON, this day. Reserved decision was given in the Supreme Court in the case of the Official Assignee of JlcKay v. LeA-in and Co., Ltd., by his Honor Jlr. Justice Ostler. "This is an action," says his Honor, "by the Official Assignee in Bankruptcy of the property of Alexander McKay, claiming that a deed of mortgage executed by McKay to defendant be set aside as a fraud on the bankruptcy laws." After reviewing the facts, his Honor says: — "It is contended on behalf of plaintiff that the mortgage of JlcKay's interest under the will to defendants as security for the debt due to them was an assignment of the bulk of his .property in consideration of a past debt, and was therefore an act of bankruptcy committed within three months of JlcKay's' adjudication, and that as the bankruptcy related back to this act of bankruptcy the mortgage is void as against the Official Assignee. Plaintiff further contended that the defendants were not. protected by the provisions of section 82 of the Bankruptcy Act, 1908, because they were aware that there were other creditors, and that apart from the interest under the will, JlcKay was insolvent, and therefore they did not act in good faith within the meaning of that section. On the facts found by mc, however, the first contention must fail. The consideration for the mortgage was not only the past debt, but the release of securities which both parties thought at the time, were of substantial value. Therefore the transaction was not an act of bankruptcy. . If the consideration for the assignment of part of the debtor's property is the release of another part of the debtor's property from a charge already affecting it, and the part so released is substantial, as in this case, then in my opinion the assignment is not an act of bankruptcy, although the assignment comprises the greater part of the debtor's property. If the giving of the mortgage was not an act of bankruptcy, then plaintiff cannot succeed, and it becomes unnecessary to consider the further question whether defendants are protected by section 82 of the Bankruptcy Act. Judgment must be for defendants, with costs, as on a claim of £1000, witnesses' expenses and disbursements. I certify for second counsel £9 9/ for the day and part of a day, and allow £7 7/ for the second day. - I allow defendants £3 3/ for their affidavit of discovery, and £3 3/ for inspection of plaintiff's documents."